29 July 2019

IBC - Counterclaim against corporate debtor when need not be stayed

29th July 2019

In a case involving a claim by plaintiff (corporate debtor) and counterclaim by the defendant for the same transaction, Delhi HC has held that both claims ought to be adjudicated comprehensively by the same forum.

Observing that adjudication of the plaint and counter claim were interlinked with each other, the Court held that the question as to whether the defendant is in fact entitled to any amounts, if determined by the NCLT, prior to the adjudication of the plaintiff’s claim for recovery, would result in the possibility of conflicting views in respect of the same transaction.

Directing proceeding of trial of suit and counter claim before the High Court, the High Court observed that counterclaim not to be stayed under Section 14 of the Insolvency and Bankruptcy Code, even though strictly speaking a counterclaim against the corporate debtor was covered by the moratorium.

The Court in the case of SSMP Industries Ltd. v. Perkan Food Processors Pvt. Ltd. observed that NCLT/RP cannot be burdened with the task of entertaining the counterclaim which was uncertain, undetermined and unknown.

The plaintiff had filed a suit for recovery and had since gone into insolvency and a Resolution Professional had been appointed.

The question before the Court was as to whether, the adjudication of the counter claim would be liable to be stayed in view of Section 14 of the Code.

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